Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q1 2013 Earnings Presentation
25 slides from Illinois Tool Works's earnings presentation, Apr 23, 2013
Slide 1: ITW Conference Call First Quarter 2013
ITW Conference Call First Quarter 2013 April 23, 2013 SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.
Slide 2: Forward-Looking Statements
Forward-Looking Statements Safe Harbor Statement This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding strategic initiatives and related benefits, operating performance,
Slide 3: Conference Call Playback
Conference Call Playback ●Replay number: 800-839-1334; No pass code necessary ●Telephone replay available through midnight of May 7, 2013 ●Webcast / PowerPoint replay available at www.itw.com ●Supplemental financial and investor information will be available on the ITW website under the “Investor Re
Slide 4: Enterprise Strategy Update
Enterprise Strategy Update • ITW continues to execute its 2012-2017 Enterprise Strategy • ITW is committed to shareholder value-adding initiatives: portfolio management, business structure simplification and strategic sourcing • Overall execution is on track and operational benefits are being realiz
Slide 5: Reporting Changes
Reporting Changes Discontinued •Several existing and previously divested businesses reclassified to Operations discontinued operations • 2013 financial impact: • $600+ million in forecasted annualized revenues, ~7% operating margin • Full year forecast EPS dilution of 7 cents; 1 cent dilution in Q1
Slide 6: Q1 GAAP to Non-GAAP Reconciliation
Q1 GAAP to Non-GAAP Reconciliation Q1 2013 Q1 2012 $ in Millions, except per share amounts Total Operating Diluted Total Operating Diluted Revenue Income EPS Revenue Income EPS Actual Results (GAAP) $4,009 $660 $1.01 $4,358 $694 $0.95 Gain on incremental 51% acquisition - - 0.05 - - - Decorative Sur
Slide 7: Q1 2013 Highlights
Q1 2013 Highlights $ in Millions, except per share amounts Q1 2013 Q1 2012 F/(U) • Total operating revenue declined 1.8%, excluding GAAP Decorative Surfaces from Operating Revenues $ 4,009 $ 4,358 -8.0% 2012 Operating Income $ 660 $ 694 -4.9% • Organic revenue by category: % of Revenues 16.5% 15.9%
Slide 8: Q1 2013 vs. 2012 Operating Results
Q1 2013 vs. 2012 Operating Results F(U) to Prior Year • North America (primarily US) organic revenue declined Total Operating Operating 1.9%; International organic Revenue Income Margin revenue down 3.5% Organic (Base) Business • Operating margins: +60 bps Operating Leverage -2.7% -6.6% -70 bps • En
Slide 9: Working Capital & Cash Flow
Working Capital & Cash Flow Net Trade Receivables & Inventory & MOH * Avg. Invested Capital & DSO * ROIC ** $12,926 $2,861 $2,789 $1,598 $12,562 $1,514 63.1 62.6 1.9 14.9% 1.8 14.3% Q1 2012 Q1 2013 Q1 2012 Q1 2013 Q1 2012 Q1 2013 Trade Receivables DSO Inventory MOH Avg. Invested Capital ROIC $ in Mi
Slide 10: Capital Structure
Capital Structure Capital Allocation Priorities • Organic investments continue to focus on key growth platforms and emerging market 1. Organic Investments opportunities 2. Dividends $0 YTD • $366M of share repurchases in Q1; Full year forecast $850M+ 3. External Investments • Approximately $70M annu
Slide 11: Revenue Growth by Geography Q1 2013 vs. 2012
Revenue Growth by Geography Q1 2013 vs. 2012 • EMEA drives organic 6% decline 4% • North America slightly weaker than expected 1% • Asia Pacific region -0.3% reflects strong -1% -2% -2% performance across China -3% -3% -4% and India; Australia and -4% Singapore down -6% •South American Total Company
Slide 12: Q1 2013 Segment Results
Q1 2013 Segment Results Q1 2013 F(U) vs. prior year $ in Millions Total Operating Operating Adjusted Total Organic Operating Revenue Income Margin Operating Revenue (Base) Margin Margin * Revenue * Test & Measurement $ 520 $ 68 13.0% 17.2% -2.1% -3.4% 120 bps and Electronics Automotive OEM 589 117 1
Slide 13: Q1 2013 Segment Commentary
Q1 2013 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends Test & ~ Test & Measurement WW: 2%, Instron drives growth Measurement and ~ Total Electronics: -9%, due to slowing in electronics assembly business Electronics ~ Auto OEM WW: 4% · NA: 3% · International: 5% Automotive O
Slide 14: 2012 Q2 and Full Year Proforma
2012 Q2 and Full Year Proforma Q2 2012 2012 Full Year $ in Millions, except per share amounts Total Operating Diluted Total Operating Diluted Revenue Income EPS Revenue Income EPS Actual Results (GAAP) $4,463 $758 $1.09 $17,224 $2,806 $5.21 Decorative Surfaces net gain - - - - - 1.34 Decorative Surf
Slide 15: 2013 Guidance
2013 Guidance Q2 Full Year Forecast Jan Fcst April Fcst Total Revenue ** 2.5% - 3.5% 3% - 5% 2% - 4% Organic Revenue Growth 1% - 3% 0% - 2% Diluted EPS from Continuing Operations $1.04 - $1.12 $4.13 - $4.37 $4.15 - $4.35 % F/(U) to 2012 Diluted EPS from 2% - 10% 10% - 16% 12% - 18% Continuing Operat
Slide 16: Q&A
Q&A SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 16
Slide 17: Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables
Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 17
Slide 18: Appendix Return on Average Invested Capital
Appendix Return on Average Invested Capital The Company uses return on average invested capital (“ROIC”) to measure the effectiveness of its operations' use of invested capital to generate profits. Invested capital represents the net assets of the Company, excluding cash and equivalents and outstand
Slide 19: Appendix Free Operating Cash Flow
Appendix Free Operating Cash Flow The Company uses free operating cash flow to measure cash flow generated by operations that is available for dividends, acquisitions, share repurchases and debt repayment. Free operating cash flow represents net cash provided by operating activities less additions t
Slide 20: Appendix Total Debt to Adjusted EBITDA
Appendix Total Debt to Adjusted EBITDA The Company uses the ratio of total debt to adjusted EBITDA to measure its ability to repay its outstanding debt obligations. The ratio of total debt to adjusted EBITDA represents total debt divided by income from continuing operations before interest expense,
Slide 21: Appendix 2012 GAAP to Proforma
Appendix 2012 GAAP to Proforma Q1 2012 Q2 2012 $ in Millions, except per share amounts Total Operating Diluted Total Operating Diluted Revenue Income EPS Revenue Income EPS Actual Results (GAAP) $4,358 $694 $0.95 $4,463 $758 $1.09 Decorative Surfaces operating results 275 42 0.06 286 48 0.07 Actual
Slide 22: Appendix Segment Structure
Appendix Segment Structure 2012 New 2013 Transportation Automotive aftermarket moved to Polymers & Fluids. Automotive OEM Power Systems & Welding becomes independent segment. Electronics Welding Electronics combined with Test & Measurement to form new segment. Polymers & Fluids Addition of automotiv
Slide 23: Appendix Segment Results Q1 2013 vs. 2012
Appendix Segment Results Q1 2013 vs. 2012 Test & Industrial Automotive Polymers & Food Specialty Total Revenue Packaging Measurement OEM Fluids Equipment Welding Construction Products & Electronics Total Organic (Base) -4.4% -3.4% 4.0% -6.7% -2.5% -5.5% -3.4% 0.3% Acquisitions 0.3% 1.8% 0.0% 2.0% 1.
Slide 24: Appendix Operating Margin % Reconciliation
Appendix Operating Margin % Reconciliation Test & Industrial Automotive Polymers & Food Specialty Q1 2013 Packaging Measurement OEM Fluids Equipment Welding Construction Products & Electronics Operating Margin % 12.4% 13.0% 19.8% 14.6% 16.7% 26.0% 11.7% 19.9% Amortization of intangible assets & othe
Slide 25: Appendix 2011 & 2012 Segment Data
Appendix 2011 & 2012 Segment Data Restated for Discontinued Operations and Segment Changes $ in Millions Q1 2012 Q2 2012 Q3 2012 Q4 2012 2012 Full Year 2011 Full Year Total Operating Operating Total Operating Operating Total Operating Operating Total Operating Operating Total Operating Operating Tot